Electrolux Professional AB (publ) (STO:EPRO.B)

Investor Day 2020

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Mar 11, 2020

Good morning, and welcome to this session where we will introduce you to Electrolux Professional. My name is Jakob Rubei. I'm Head of Investor Relations. I'm sure you understand we would have preferred to meet you in person. But given the circumstances with the coronavirus and the travel restrictions, we have decided to run this as a joint webcast from Stockholm and from Italy. All in all, to provide you with the best opportunity to see all about the company and also ask questions. So thank you for joining from wherever you are. The agenda for today will cover the following things. We will start with strategy, of course products our largest market, Europe industrial operations and, of course, finance. After approximately 1 hour, we will have a 5 minute break. And at the end of today, we will also have a question and answer session. By that, I would like to hand over to Italy and Alberto Sanata, CEO of Electrolux Professional. Thank you, Jakob, and good morning to everybody. There are 3 things that I'd like you to remember or to bring home after these hours that we will spend together. The first one is to get to know a lateral loss professional, what we are, our track record, our performance, to understand that we are a solid company with strong base. The second is that we are in a market, an unhealthy market that has been growing and that will grow because the macro trends that are driving this market are there. And the third one is that we at La Atlas Professionnel we have a plan. We have a clear and well defined plan to capture the growth of the market and the opportunity that our positioning in this market is offering to us. It is also important to say that all these strings together have value only if they are supported by a great team, a team of 3,000, 4000 people that are today represented by myself clearly, but also by the colleagues that will go deep in the analysis or in the explanation of the different areas. In particular, I'm talking about Philippe, who will talk about Europe, our strong foothold. Carlo will talk about the operations that we have all around the world. So, getting the argument more about what we are and why we believe we have strong fundamentals to grow. And then clearly, Thorsten talking about the future because products are always the fuel for the growth of every company. And then last but not least clearly Fabio who will recap all these things together giving a picture of where we can go, where we can be in the near future. But let me start from the first point that I mentioned as one of the things I'd like you to remember that is what we are. This is a picture with some number, but let me cherry pick some of them. We have been growing the business during the years. In 2019, that has been a challenging year and we will talk about that later on. In any case we delivered a solid margin, a solid profit But if I look back some years before the transformation year of 2019, in the previous 5, 6 years we have been growing the top line by 50% and increasing the earning, doubling the earnings. So there is a track record, a positive track record. And it is important, the past, because it should give trust of what we are able to do and we can deliver in the near future. The other important element is our presence in Europe. 2 third of our business is in Europe. Europe is our home base. We are a European company and we have to be strong at home to have all the credentials to grow outside. And we are strong in a market like Europe that is a market with a lot of complexity. And Philippe will argue about that and how we manage this one turning it into advantages, into a competitive advantage. And the third one is the global presence, the global footprint to serve our customer. And this is important because we are in an industry that is globalizing, that is already global. I believe you recognize the same brand of the hotel, the same brand of the restaurant wherever you travel around the world. And we can serve this customer around the world. And more and more these kind of customers are looking for partners, for partners that are following them during the growth. I was mentioning 2019 and that 2019 was a year of transformation for us, deep transformation. I've been in the company 30 years, so I've been living not all this history of a company that has more than 100 years of history. But I was here when in the late '90s, early 2000, the sector on that time or the division of El Atlas Group was formed, aggregating all the professional businesses that were around. It was the time when we went through reorganization, restructuring, closing brands. But it's nothing compared to the transformation we had last year. Because last year, after the decision to separate the sector, we have been creating many new organization around the world to be independent from the group. But beside all these things that happened and the big change was in the change of mindset, because the culture will remain the same. We've been in the not only myself, also my colleagues have been in the in the lateralist group for many years. So the culture is there and will remain the same, a great culture of a great company. But with the mindset, the behavior of the people will change because we are acting in a specific manner environment and we will be focused on the environment to increase flexibility, agility, speed. So a big change in this one. And this one, together with what happened and then we initiated in the late 90s, early 2000s is what is forming what we are today, a company with a unique position in the market. Unique position because we have one brand that is covering all the needs of our customers, not only for what product is concerned, but also for what service is concerned. And the customers are looking for solutions that are helping them to simplify their life. And that is exactly what we do every morning. When we wake up and we come to the office to the factory or we go around selling our product presenting them because our mission is to make the customer of the life of our customer easier and more profitable and truly sustainable every day. That is what we do. That is the reason to exist for a Laplace professional. And that is absolutely valuable because it is in line with what is happening in the market. And so this is let me introduce the second things that I want you to remember. That is the market. This is a healthy market. We will talk about a little bit of what is happening these days with the spread of the coronavirus. But despite that one, the fundamental things that are driving the growth of this market are there. He has been growing and it will grow in the future because the urbanization, the growth of the middle class, the ability to spend more, but also the desire to live, to travel, to visit, to eat out of OMA are there and they will continue to grow. It is a market that I repeat is healthy and growing, but it's also a market that is evolving. It's evolving according drivers like sustainability, digitalization, trends that are creating in some way complexity because if you think about when you go out for dinner with your friends, more and more there are many people inside of the group that want specific things. They do not accept what is there only. So our customer have to become more flexible and who is providing the tools to work, like us have to be more flexible. But let me argue a little bit about the sustainability because it is also the DNA of this company, of a lateralx, of a lateralx professional. And sustainability means not only being green. Sustainability is a wide sense. I always use the example of a table with 3 legs, where all the legs, the 3 legs, they have to be all strong and all equal. 1 is surely being green, eco friendly. But doing so you are also asked to reduce consumption, energy consumption, water consumption, everything. And this second part is very important for the 2nd leg that is the financial, the economy. Because in this way you are good for the pocket of our customers. And the third one is the social responsibility, making sure that when we develop product, when we deliver services, we think about how they are used by our customers. And that is the reason why we invested so much in standing the ergonomy. And we are the 1st company that has the ErgoCert that is a certification stamp on our product making sure that our product are designed to create the best condition to be used by the operators. These are important things. And the understanding of this importance is growing inside of our customers. They start to understand that the price ticket is only 15% of the total cost of running our product. And with our solution, we are addressing the remaining 85. So, what we are, where we play and what we can do to further develop this business, to grow this business. These are the cornerstone. And I will go through each and every one. But let me summarize them saying that we are both targeting the top line growth, the development of the business. Because in these are the area and you saw that one when I showed you the mix of the sales. We are addressing the area where we are underrepresented in some way, where we have room to grow, space for improvement. 2 third of our sales are in Europe that is only 1 third of the market. The remaining 2 third of the market are equally divided between North America and the emerging areas. So we address these things. But we are also addressing the growth of the bottom line. Because to grow customer care, to grow and develop new product with new features that the customer wants and is willing to pay will surely make us growing also in the profitability and delivering a profitable growth. As I said, I'm going a little bit through these 4 pillars even if at least some of them will be deeply discussed and analyzed and presented by the colleague later on. But if I start with the products, I like this chart because it's saying that we have innovative solution in food and beverage, in laundry. So it's not that Electrolux is delivering only the full solution. We are delivering full solution with champions inside. And these are the products that we introduced just last year. And 20% of our sales are coming from products that we developed just in the last 3 years. Product that have been developed according to these guidelines, performance, environment, looking at the profit of our customers because this is key. This is making the customer's life easier and more profitable. And innovative solutions are also instrumental and important, a key to work in the 2nd pillar of our strategic plan. That is the development in North America. With the chains. It is important not to grow in North America not only because it's a large market, but because it's the home of the chain business. And to win with this kind of customer, you need to bring something new, something that is changing their working flow. I'm using just an example, the product that is pictured in the middle that seems to be a fridge in reality is a thawing cabinet that we are delivering to Cracker Barrel in the United States, to KFC, in countries around the world, in Asia and Australia. What is that? Typically to the frost food, you have to get the food from the freezer to a fridge or to a cold room and leave it there 24 hours. With this product, it takes 6 hours. What it means is not just a matter of changing the time. It's giving the possibility to our customer to review, reinvent their work in process. They can decide what they want to defrost, what they want to cook, how much food that they need to defrost just 6 hours before they need it. They can decide in morning for what they do for lunch in the evening, while with a traditional situation or solution, they were forced to do it the day before. And we all know, especially these days, how things can change in 24 hours. But in all these solutions are also important in other areas because these chains are expanding globally. So our global footprint with our presence in the emerging market is important to make sure that we can serve the chains wherever they go. And they look for this solution because the growth is mainly outside. And beverage is an important product that is just added one, added category to our portfolio. But first it's growing more than both laundry and food. And secondly, it is a vehicle to enter many customers that they can look for us for other product. Because if we provide a solution that is really improving their workflow, then why not looking also for the rest that Electrolux can offer? We in the factory, we are looking to reduce the number of supplier, to simplify our life, to work better with the best. The same applies to this customer. They are like factories when they produce food. The 3rd area that is strictly linked to the other is the customer care. Customer care is important because growing customer care, we can significantly grow also the margin of this company. But I believe that customer care first is important because of the meaning of the word, because it means caring about customers, keeping the relation with the customers along the life of the product. Our products are lasting for years. We estimate 4, 5 in the U. S. Up to 8, 10 in Europe. And during these years, we have to help the customer to make this product working properly, selling accessories consumable, providing them with maintenance contract. And this is coming more and more because the nightmare of our customer is the downtime. So when the product is down and they are not able to work, to operate, to serve food, and we can do it. Not only the product, they are interested about the system Because to have the oven working, but the dishwasher that it doesn't work, it's not solving their life because they don't have clean stuff. And when you have dishwasher that are washing thousands of dishes per hour, there is no way to do it by hands. That is the reason why we believe even more than before our value proposition to be the 1, the one that is providing not only the product but also the services, is going to become the winning element. It is just the beginning in some way because the digitalization of these industries like the others is at the beginning but is rapidly growing and most probably it will grow even faster than in the consumer business. We already have cases of customer installations where the products are all connected because the customer cannot manage a single connection with single items. In a kitchen, for instance, you can have roughly 100 appliances. The kitchen here in Porta Noni for our staff canteen is roughly 100 different appliances. Can you imagine on your tablet, mobile phone or whatever, 100 different taps to control the 100 different products? It can be. You need something that is putting these things together. Something or somebody that is managing the ecosystem of your working environment. And this is one. This is why we believe we are the 1 with a strong value proposition to address the need of our customer. So these are the 4 pillars. The expansion in North America chains, in the emerging market with the beverage, the customer care, the fact that we are the 1, the only one providing all the possible solution to our customer. Not necessary all of them, they need everything, but we can do it. And more and more the overlapping among these different families is growing. And these are the reasons we believe we have all the ingredients to deliver an organic profitable growth that we will surely be able to accelerate as we have been doing during the past years, the recent years, acquiring company that are all fitting the strategic purpose, the strategic need. Companies that have been able to give us the possibility to enter the beverage, to complete the range of the beverage, to expand in the emerging market, to get also capabilities knowledge about renting that is another trend in this industry. Let me now step back Ori, if you will for surely spend a couple of words about the big things that is in the mouth of everybody. If you open a news, television, paper, whatever, the headline is about the coronavirus. So I would like to anticipate some questions from you regarding the status of this operation, in particular considering that in some way the spread of the coronavirus obliges us to organize the meeting in this way. I would say in this modern way, digital way, but surely different than what we were supposed and we desired to do. First things, our people are healthy. To my knowledge, up to today, we don't have cases in any of our operations. And that is the first thing. And it is important because we have been taking actions to make sure we prevent the spread of the virus inside of our operation. For instance, here in Pordenone in Valenoncello, where we have the largest site for food, We have been splitting the site in different areas, production, logistics, R and D, the office building. And we make sure that people from one block don't mix with the other. We are taking action to measure the temperature when people inside, in particular the visitors, making sure we are using masks, making sure we keep our hands clean. So whatever we can is in place to make sure that our people are coming to work in a healthy condition and they go home in the same one. We also encourage obviously smart working, working from home for whoever can do it and how much they can do it. 2nd, operations are all up and running. Supplier chain is up and running. In Italy, the 2 factories in Italy, the factory in China, all the suppliers wherever they are, they are up and running. We are producing, shipping and invoicing. Things can change and we have planned to face different challenges, including the shutdown of part of some facilities. But for the time being and to our present knowledge, all our operations are up and running. 3rd, market surely suffering. In particularly the part of the hospitality industry that is related to restaurants and hotels. But there are other markets or other segments that are less impacted by the virus. Think about the hotels sorry, the hospitals. There are areas where they are already working more than before. And this means that for a company like ours that is delivering developing and delivering high hygienic solution. This could become an opportunity to help the world in some way. So this is the status of the coronavirus. And this is in some way the way to recap, to come back to the 3 things that I really want you to remember, and we will succeed with this 2 hours of presentation if you will live with these 3 things in your mind. 1st, we are a strong company with good foundation, with a theme that I've been able to deliver in the past years and going through challenging times. And we'll go through also these challenging days. 2nd, the market is a good market that have been growing and will be growing. Could be that there is a slowdown these days, but it will surely recover soon. 3rd, we have a clear plan to address the market trends, but also to cover the space that is offered and the opportunities that are there considering our present positioning in the market. Having said so, I think it's time to get into the specific areas. And I would start with the Toasten in Stockholm that will drive you through the innovation, meaning for a lateral professional. Thorsten, they are yours. Thank you, Alberto. The next couple of minutes, I would like to go a little bit deeper into our complete offer for foodservice, beverage and laundry. How do we address with innovative solutions the key challenges of our customers? How do we make their work life easier, more profitable and truly sustainable every day? How does digital solutions help our customers to increase productivity and to increase food safety. And I will talk also about Accenture, our global customer care offer, our branded customer care offer. And then how we bring all the three things together, the physical product, the digital product and the customer care into our one approach, how do we create value for our customers. Now I would like to start with the food service. We have a complete and competitive offer for all relevant segments like travel, hotel, restaurant, hospital. I'm pretty sure many of you or all of you have been recently to a restaurant also more than once. But have you seen also the kitchen, how many different products you can see in the kitchen? We can provide all of them. When we look into innovation, we don't look only into the single product. We look into the production flow of our customers because here, we do see the biggest potential for improvement. It is like in our factories. You can optimize one single workstation, but you can you have a much better impact when you look into the complete flow of the production. And Adeato mentioned already before the towing cabinet. I want to give you another example, the cook and chill solution. It's not just an oven. It's not just a blast chiller. No, it is a system, the cook and chill system. These 2 products, they do work together, They optimize each other. They have the same user interface. They use the same programs and they are connected. They talk to each other. And I will show you later an example on that, how we are able to reduce significant labor cost for our customers. I also would like to highlight the dishwashing area. Thanks to our acquisition of Witsan in China, we have a very strong position in dishwashing in the emerging markets. And we saw already before the corona crisis, a highly demand of big dishwashing installations because of the upgrade and the higher hygiene demands. Emerging markets are moving from hand washing away to machine washing due to these higher requirements of hygiene. We expect after coronavirus that this will even accelerate this trend. Now I would like to move to the beverage area. Thanks to the acquisition of Grindmaster Cicilware, SBM and Unique. We have a complete offer of products for hot, cold and frozen beverages. We have a complete range for drip coffee, American coffee, And we have also complete range for espresso machines, from the manual one, semi automatic to super automatic machines. This is clearly a growing segment. And we have also recently added a complete line of soft serve machines for the soft ice from small capacity to big capacity. All these products and all the ranges we made already available also on the Electrolux brand to leverage on our strong Electrolux distribution network and to grow the beverage business even faster. Mainly change investing into beverage solutions because it's easy to implement for them and they provide a very high margin and a fast payback for them. And the last area for the product part, I would like to go to the laundry part. Most of you, and I know already, front load a washer and a dryer because you have them at home. You use them every day. The professional machines are very similar. They do the same things. But they are much bigger, up to 120 kilogram capacity for each load. And they have to last much longer because they're up running the full day. What you might not know are the barriers washers. These are products used in elderly homes, hospitals because these products avoid cost contamination. You load the machine, the machine is loaded from one side and unload it with a clean garment from the other side so that you don't cross and you don't have any cross contamination. Also here, we expect a growing demand the next couple of months after the coronavirus because institutions, hospitals, elderly homes, they will upgrade their installations. You might ask yourself, how do we handle all this complexity and all the products in the factories. All new products are developed in a modular way to reduce the complexity and to reduce the impact for the factory so that we can run the factories in a very efficient way and combine the different modules according to the need of our customers. The last couple of years, we have proven to bring innovative solutions to the markets, focus on the total cost of ownership for our customers. And total cost of ownership could be 3 things. On one side, we act on 3 dimensions. It can be utilities, water, energy and chemicals. It could be labor and it could be food waste. I dare to mention already before the towing cabinet. I don't have to throw away the chicken because I tow too much. But also I would like to highlight here the precision brewer. Especially in the U. S, when you go to a coffee shop, you have many choices of different blends and different coffees. But the coffee expires. It's not any longer fresh. Our Precision Brewer have a small agitator to prevent the coffee from the fermentation. It keeps the coffee fresh for longer. That means our customer don't have to waste the coffee. For them, it's pure money and to put it into the drain. No, he can sell it for longer. We also recently launched a complete new range of laundry products, dryers and washers. Here, we focus really to reduce the utility cost, because especially for laundry, the initial cost for the investment is only around 15%. 85% of the total cost of ownership for our customers are for chemicals, energy and water. And we help our customers to reduce this iceberg and to melt this iceberg down to reduce the cost for them and to make the operation more efficient. I want to show you one case study for the multi house laundry in Sweden. We recently renovated in the multi house laundry 19 laundry rooms. It's a full turnkey solution. Also, the customer choose an essential maintenance contract. He wants to have a peace of mind. The total investment was around SEK 6,000,000. We provided our new solutions with automatic load detection and adaption. That means the water use only the machine use only the water, the energy and the detergent accordingly to the load of the customer because the customer doesn't and never load the machine fully. It loads us up to 30%, 40%, 50%, maybe 60%. And our machines are reducing, thanks to this innovative technology, the usage of energy, detergent and water. And in total, we were able to reduce the cost for the customer by around SEK4.6 million, which is already close to the total investment. And all these machines are also connected because for the user, it's really annoying when he goes down to the laundry room and the machine is booked and he cannot use it. So you can book it before online. Another example to reduce labor costs, I would like to bring for the new skyline, the oven and the blast chiller. And I know all of you are traveling a lot going to hotels. And what I like a lot when I go in the morning to breakfast to have fresh bread. But do you know when the chef has to be in the kitchen that you can eat fresh bread, he has to come at 4:30 because it has to go in the proving cabinet to prove the door and then around 5:45, he has to put it in the oven. We automatize this. The chef, before he leaves the kitchen in the evening, can load the blast chiller, keeps the door cool, and then according to the time when it's needed, it starts proving because the blast chiller can also go to positive temperature. And then just around 5:30, 1 hour later than normal, the chef can come and go unload the blood sugar and load the preheated automatic preheated oven at 5:30. This reduced labor hour of 1 hour and this counts for the total year 3 65 days for around €9,000 savings only in this operation and during the day you have many more operations like this. Let me summarize the key benefits across all categories. We are focused on long term savings for the customer, but nothing is out with long term savings without the performance. We have to have the right performance for the customer. We are focused on productivity because the laundry is getting smaller, the kitchen is getting smaller, and we have to be more on a smaller footprint. The customers are able to have the real time solutions. They see what happens in their kitchen, how effective they are. And Alberto mentioned before, the AGOSAT certification, all new designs of our customer are human centric, and this is certified by an external institute. But nothing is without a great customer care offer, and we have 3 pillars. We have a full range of consumables. We have a high level of spare parts, and we can ship within 24 48 hours worldwide to avoid for customers downtime. But to avoid downtime, we provide also a new product and this is Accenture. It is a maintenance contract. And with the maintenance contract, we are able to create a spinning wheel. We are constantly in contact with our customers. We have the post service recommendation. We provide original spare parts to keep the performance for the customer live. We talk about fast, easy repairs, original accessories and with a happy customer, the customer will also replace it with a new Electrolux product when the lifetime of the product ended. Has to be easy to sell, easy to buy and easy to service. And everything comes together with the one approach where we bring the physical product, the digital product and the customer care product together. The customer can focus on his core business to create value and a great experience for his customer in the hotel or in the restaurant. And the customer has only one point of contact. But really, it's I think it's better when I let a customer speak and we have an example of a hotel in Wales where the owner was able, thanks to Electrolux, to bring his cost center laundry into a profit center laundry. My name is Wells Jones, and we're here at the Cliff Hotel and Spa in Cardigan. We've got a 73 bedroom hotel and spa. The 1 Laundry app has allowed us to monitor efficiency of the laundry and allowed us to bring in external laundry from other sites to make a cost center in the business into a profitable section of the business. The information from the app has made it easier for us to organize our rotors to make sure that the laundry staff are coming in at the appropriate times to make sure that the laundry is fully efficient throughout the day rather than coming in early and letting machines sit idle during the day. We've seen a reduction in payroll by bringing staffing in at peak times, rather than bringing them in at a set time every morning. We've also seen efficiency in the load factor of the machines because they're becoming later, so there'll be more laundry so the machines will be filled to their maximum from the word go. This solution has allowed us to reduce our payroll costs and our utilities substantially. We found the data that the 1 Laundry app has been providing us particularly useful for reducing some of our shift patterns. We had a night laundry shift that we've been able to remove because the day shifts are more efficient. The Win Laundry app is easy to navigate and easy to use. You can easily find the information that you need, such as the load counts and the efficiency of each machine. I would recommend this app to other business owners. We found it particularly useful for growing our laundry and making it very profitable by bringing in external laundry on top of our 4 hotels. We're bringing in another 5 hotels of laundry and about 200 pieces of laundry a day. I believe it is really a great story, and it is only one of many stories because we have many other things connected. We have also complete kitchens connected. And this is really to show how we bring 1 to life. Let me summarize now everything from the last couple of minutes. We have a strong complete offer product offer in Food, beverage and laundry. We have innovative solutions to address the key challenges to our customers. We are using digital tools and connectivity to address this. We look into the total cost of ownership for the customer to reduce this. We have a strong global customer care setup with 3 pillars: the consumables, the spare parts and Accenture as a maintenance contract, and we are growing this business and we further invest. And everything comes together with the one approach where we bring the physical, the digital and the Customer Care product together to create value to our for our customers. And now I would like to hand over to Filip Savatiero, responsible for sales in Europe, and he will explain you now how he's able to grow the business in Europe, thanks to these great innovations. Thank you. Thanks, Doctor. N. Good morning to everybody. Europe for Electrolux Professional, one of the key asset, as Alberto said. I will divide my time in 2 key points. The first part will be articulate around 4 messages. First, Europe is not one market. Europe is a mosaic of market creating high complexity. But electronics professional has been able in the time to manage this complexity, to create value from this complexity and to create a really competitive advantage. The European Organization is a winning organization, growing consistently since 2013, overpassing the market growth. But this organization has in front of it a bright future. The second part of my presentation will be focused on to explain to you how we are managing customer and what are the key driver for our sales success. Europe is not one market. Let's make a comparison between Europe and U. S. 365,000,000 people, more or less the same market size. But on one side, one country. On the other side, 48 countries, one language, 24 language. In U. S, more or less everywhere, we are eating burger. But do you believe that we eat the same thing in Sweden, in France, in Italy, in Spain? Do you believe that we are drinking the same kind of coffee in Italy, in Sweden, in U. K, when in U. S, we are drinking filter coffee and American coffee everywhere. This complexity force us sometime to create specific product to address specific market like in Sweden, like in Germany. Sometimes, we are also facing more local competitor than international competitor like in France. But the beauty is that Electrolux professionals succeed to turn around this complexity in a competitive advantage, creating a strong asset, a strong organization, 1,000 people aim at targeting every business, managing every channel From institution, hospital, prison, hotel, from the small one to the big one, from the 2 star to the 5 star restaurant, from the fast food to the Michelin Star. I would say to summarize that, in Europe, we can say that more or less every company could become an electronics customer. Why? Because people need to eat. We need a kitchen or we need to close to wash garden or perhaps we need to drink coffee. This is our market and business. To address this complexity, we divided our organization in cluster. What is a cluster? A cluster is an aggregation of market, country presented the same specificity in term of market but also the same kind of channel management. Nordic country, East Europe, Mediterranean cluster. Inside this cluster, we are divided in 3 main teams. The first team is the Electrolux team, fully focused on owning the market and the customer, providing a 360 customer approach from presales, sales, sales order processing, marketing, after sales. With dedicated people, we address all the kind of business, project business, unit sales, food, laundry, beverage. In parallel to this organization, we have a fully dedicated organization to address chain and international key account. This is what we call a clocall organization. Why? Because this organization is consolidated at sector level, being global, having dedicated people, offering one point of contact to the key account at global level. When, at the meantime, we have people working locally with local stakeholder and local presence of the international key account to adapt the project and to manage locally the project. Last but not least, to complete our market penetration, we have a dedicated organization to drive what we call specialty brand, to compete face to face to specialist competitor. The purpose of this organization is clearly to optimize our market coverage and to address some channel that we don't want to address with the Electrolux brand. This organization, this strong organization, 1,000 people, represented 66% of the full Electrolux professional turnover is in a healthy and solid organization. Since 2014, we grew. We overpassed the market growth. Look at what's happened the last 3 years. We grew by more than 10%. Why and how? Because we leverage product launch. 2 kinds of product launch: Product launch, what has been developed by Thorsten team to reinforce and consolidate our strength in the market, in the project business like Termaline that has been launched in 2014. But also, we leverage new product, dedicated product like the tow in cabinet, explained by Alberto, like the Aspic Panini Grill, dedicated product that has been clearly developed to accelerate the penetration to the chain business. But also, we work on synergy because we want to optimize our costs because our growth is not only a pure growth, this is a profitable growth. Years on years, you create synergy, we decrease cost, we become a more efficient organization. But this organization has a bright future in front of her. Why? Because thanks to the new product and you saw with Torsten how wide is our product portfolio and how wide is our product launch, both in food and laundry. But now we will have the opportunity also of beverage, of coffee. We will have also the opportunity to accelerate the chain business to the strong organization that we put in place in 2014 and that which is bringing year on year payoff and fruit. Because of Customer Care, we start to implement Essentia in some key countries in Europe, Switzerland, U. K, Sweden. And definitely, we are seeing that this is paying off because we much more improve our customer care value in this country. What is important also now to understand is how we are working with customer and what is our key driver to win the business. I will start with 1 international key account, Autogrille. Autogrille is acting on the travel business, mainly in Italy, is offering food in the petrol station, in the airport and in the train station. We started to deal with Autogrille in 2006 during the Olympic game in Torino. We did altogether the catering for the event. In 2009, Autogrille came to us with a problem. We have a big problem, electronics professional. Could you help us to manage the lunch rush in the petrol station when everybody want to stop and to eat in 10 minutes the famous Italian panino. When you know that to make and to provide a good Panino, we need at least 8 minutes. We have a solution. We developed a dedicated product, the high speed Panini Grill, aimed at dropping the time to produce the Panini Oil from 8 minutes to 21st seconds. Fantastic. We solve a problem. We become credible. We become a trusty partner. And thanks to the wide portfolio we have in Electrolux, we start to increment our market share within Autogrille, what we call increasing the share of wallet, adding dishwashing. Not only because Electrolux is an international company and because Autogrille want also to develop its business outside Italy, in France, in Benelux, in Qatar, in China, we follow the expansion of Auto Grill outside Italy. Not only now, thanks to beverage and coffee, we will be able to provide also to Auto Grill beverage, and we know how it's important, beverage, coffee machine. But there is more. Thanks to connectivity and our capability to measure the use of a product, the product with high speed Panini Green being connected, Tomorrow, we will be able to change the business model. We will be able to ask Autogrille not to buy a product, but to buy a function and to pay for use. All in all, we multiply our turnover in Autogrille by 5, and you can imagine that this is not the end of the story. Now let's move from the fast food to the high end restaurant. Mandarin. Mandarin Oriental, famous international Asian chain business. This is a typical electronics business. How are we able to get this business? 2 main things. The first thing is because of our global organization. When we have people at the central team talking directly with the headquarter of Mondherin in Asia, defining the specification, In the same time, we have people in the field talking with a local executive manager to adapt the kitchen, to adapt the laundry and to define altogether the right product inside our wide product range. But not only this is because of our reputation. And I will tell you one story. One famous luxury company in France 4 years ago want to really enter in the hospitality business and to create a new hotel chain, Cheval Blanc. The owner of this new hotel chain called me for making an offer. But first to start, I said, what I want to create is the best in class hotel in the world. Are you the best in class offering kitchen? I say, yes. Look at the high product we have with Molteni, which is definitely the Rolls Royce of the product of thermaline, we are the best in class. He said, okay, I will prove it. He did free call to 3 Mission Star Chefs everywhere in the world. Each of them say, yes, the best in class is electronics with Molteni and Thermaline. Do you believe that this is the end of the story? No, not at all because thanks to this reputation, we will continue to increase our business with Mondheri in the last. We did this Milano, but we did also in Turkey. We did also in U. K, and we will continue to develop our business with them. But now, thanks to the new acquisition, we will be able also to provide to Mondherin to extend the full package to coffee and beverage. I don't want to finish my time without telling you that, yes, Electrolux is very well recognized as the best in class in providing the full system. But not only, Electrolux is also the best in class company for some product category and mainly when we are discussing about sustainability. The last example is what happened with Karstadt School in Sweden. They challenge us. They want to decrease by 2, the energy consumption. And they say, Could you help us, Electrolux? What we did? We said, Let's try and buy. We provide them to equip their full cold storage with refrigeration and freezer. They did their own measurement, own calculation and let's see the result. We divided by 10 the consumption for the refrigerator and by more by 3 for the freezer. We were challenged, we proved, we convinced. Let me summarize now Electrolux Professional in Europe. Europe is a complex market because it's a mosaic of market, it's a mosaic of country. But the beauty of Electronics Professional is that we are being able to turn around this complexity to create value and to build a very competitive advantage. Electrolux Professional Europe is a winning company. We did very well in the past. We grew in a profitable way, but we have in front of us a bright feature. And the beauty of this bright feature is that to achieve our target, we don't need to make a revolution. We just need to apply and to do what we did and what we are doing. And this is let me finish like this, thanks to 1,000 people, 1,000 passionate people. Thanks a lot for your attention. We will start this 2nd part of the day with Industrial Operations. So I hand over to Carlo Caroni in Italy. Thank you, Jakob. You have previously heard about market opportunities and our strategy to make the most of this. But how can we, as global operations team, contribute to our company mission, achieving in the most sustainable way, profitable growth. We have clear priorities on our roadmap. Right product availability superior quality to sustain our positioning in market cost competitiveness to expand our margins. And we have a key asset to secure our ability to deliver a team of highly qualified and motivated people. We previously saw that our company is the 1 in the industry able to provide multiple solutions. What does it mean for us, industrial operations? We need to be able to manage a wide product range, as illustrated by Thorsten, but we need also to be able to support projects, as illustrated by Filipe, new hospital, new cantina, new hotel and we need to sustain unit sales where speed and agility are key because in front of us we have customers with the urgent need to replace a tool which is vital to run this business. Think about an oven for a restaurant. An oven is like the engine of the kitchen. And we need also to have a capability to gear up our capacity in case of big orders from the chains. And we learn how chains are important in our strategy to grow both sales and margins. And finally, we need to be able to manage new acquired companies. So we can say that naturally, complexity is our environment, but we make a clear distinguish between the good complexity, which brings value to the customers and the complexity, which is only creating extra cost and extra inventories to our company. We are totally committed to deliver on the first for what we call operational excellence, while we want to eliminate the second. And we are doing it through the standardization of the components and the modularization of new product platforms as introduced by Thorsten, with a clear target to reduce cost and to reduce the working capital, in particular on the inventories. We're now focusing on the key aspects from an economic standpoint. And let's start from purchased material and bought in product, which represent the most significant portion of our cost. Steel and the mechanical components traditionally represent the biggest bulk of what we procure. But during last year's electronics has a tremendous development. We secure both prices and availability of steel, thanks to global negotiations covering not only the needs of our internal plants, but also the needs of our key suppliers. And we do have a big opportunity, which is supply consolidation. Number of suppliers was incremented significantly in the last years during the acquisitions. And we want to do it with a very well balanced approach between effectiveness, meaning the capability of the suppliers to deliver quality and to be on time and efficiency. The capacity of the suppliers to reduce cost and our ability to negotiate better terms in terms of delivery and payment in order to have a significant impact on working capital. Digital transformation for us is an accelerator of performances and speed. We are developing new solutions not only on the procurement side, but also in the shop floor to link our IoT's like automatic warehouses directly to the suppliers in order to have automatic material call off. But the real strength of our organization is our people and their capability to act as one team. We recently structured a global organization. What does it mean? We want to have our buyers as close as possible to our suppliers, perfectly aware about market conditions, able to negotiate with the local language, but moreover according to the local culture to serve the needs of all plants across the world. This kind of proximity was the key to navigate across the recent coronavirus crisis in China. We were able to maintain 100% of our facilities efficiently up and running. And we are doing exactly the same in Europe. Let me now introduce our industrial and logistic footprint. We count on 12 industrial sites with different scale. 3 of them are both significant, representing up to 75% of a product cost, Italy, Sweden and Thailand. The kind of structure of our sites is calibrated on the specific needs and the scale oversight. So we have some plants which are rather small, merely shop floor manufacturing facilities. Our facilities integrate also product care activities with R and D, while for product development, we have 3 main sites to develop the new products. Italy for food, Sweden for laundry and the USA for what concern beverage. Our facilities are organized by product categories and we can say that average, the load is 1 shift a day. Does it mean? It means that we have a possibility to gear up the capacity without adding CapEx. If you ask me what's the strength of the industrial setup today? I believe that the strength we have is flexibility on the mix and the capability to shorten the lead time. Let me give you some numbers. For 80% of the product in laundry and food, we were able to squeeze down to 3 days the production lead time from the order to the delivery to the logistic distribution. Logistic, which is based on 4 main hubs to distribute our product across 110 countries in the world. So our setup for sure is ensuring proximity to the customers, but how to combine competitiveness. We have 2 main criteria. Number 1, scalability, which is the capability of our plant to adapt not only capacity but also the structure based on the demand. Number 2 is network. The integration between facilities resulting in strong control on their performances and also synergies on the structural cost. But let's explain better what does it mean, scalability, for us. Let me introduce an example coming from last year. We had to support a big rollout for our customer Subway, a big chain in the U. S, where we have to deliver cold beverage units from our young plant based in Thailand. We were able to do it multiplying by 3 the capacity of a plant, of the entire plant in few weeks. And we have done it without additional CapEx, thanks to the readiness of the whole supply chain, but thanks also to the ability of internal people to reshape the layout on the new capacity required and thanks to robust standards and tools in order to ensure quality and efficiency. And last but not least, an effective manufacturing training system to integrate quickly new people. But let's come back on the meaning of network for us, which is not only sharing structure, common services among the plants, in particular the small plants, but it is also exchanging best practices in order to have every plant, small and big, performing at the highest level. The network we have is based on a common standard and methods, which is gathered together under the umbrella of a production system, which is structured as a world class manufacturing. World class manufacturing which gave a common language to a team in the different plants, in order to exchange best practices among the plants. And we reward not only whoever is creating a best practice, but moreover, even with more emphasis, whoever is proudly copying the best practices. We do all this not for beauty contest. We do this in order to get tangible and measurable results. On top of continuous improvements, we have additional measures to accelerate our competitiveness. Number 1, footprint optimization. An example is this year, we're building a greenfield plant to merge laundry and beverage activities in Thailand. Number 2, platform rationalizations. This year we are cutting by half the number of platform a significant family of product on dishwashers, and we are localizing the production in a fast growing market. Number 3, optimizing make or buy. This is a continuous activity in order to fine tune our setup, optimizing quality, availability and clearly cost. Number 4, logistic hubs rationalization. An example, this year, we are closing a hub in Central Europe, expecting advantages not only reducing inventories but also reducing cost. And finally, innovation and digitalization in order to boost furthermore our performances. Few words about the new plant in Thailand. It will be a state of the art plant in terms of well-being for our people first and will bring us higher competitiveness in terms of synergies on structural cost and optimization of logistics. But we will have also a new laboratory in order to develop solution for laundry and beverage in that area. We will have further space to develop further more business in this region, which we consider highly competitive and located in a fast growing market. Last but not least, innovation. What does it mean for us? It's not the kind of solution, but also the way to go to the solution. And this is an example coming from Italy. The purpose of this project was to announce for productivity on a refrigeration line. The tool that we used was a tool to visualize in 3 d the different solutions, helping us to have onboard the shop floor people, the operator from the line. And the result was amazing. We were able to cut by 40% but not value added activities. We were able to have a vertical startup, means speed in execution, 100 percent of ergonomics for the well-being of our people and 100% of first time quality. Let me now resume. We have a track record in terms of displaying our customer obsession and systematically having the capability to do more with less. But the beauty is that we have further opportunities in order to improve our cost and reduce the working capital. Through the simplification, we mentioned standardization and modularization. Thanks to the effectiveness of the new purchasing organization, thanks to the implementation full scale of the world class manufacturing and thanks to the extension of the best practices we have in laundry and food to the new acquired plants. Last but not least, digitalization and low cost automation will further boost our performances. Thanks very much for your attention, and let me leave the stage to Fabio d'Arpellon, our CFO. Thank you. Thank you. Thank you, Carlo. Good morning to everybody. During the last hours, my colleagues shared with you 3 important facts. 1st, we are operating in an attractive global industry and Electrolux Professional has a unique position to win in this industry. 2nd, Europe is our backbone, but we have a clear plan and market opportunity to profitable growth also in Asia and in Americas. 3rd, our industrial operations that Carlo Mario Caroni has just presented are well equipped to serve our customers on a global base, but also have a clear identified action plan to continue to improve our cost base and therefore our margin. Now what are the message from me? My message to you is that we are a solid company with a large potential. We are a solid company because we have shown by our historical performances that we are able to deliver steady EBITDA and cash flow. We have large potential because we have 2 attractive segments: Laundry, with already very high margin and possibility to further expand the size of this segment. We have food and beverage where I see both potential of growth in thermal size and margin expansion. And to deliver on the margin expansion, we have a clear, actionable plan, a plan that combines cost improvement initiative and volume growth in the attractive high margin part of our business. With that, let me give you the view why we have had a solid track record. Over the last 6 years, we have been able to grow this group by 9% per annum through the combination of organic growth and acquisition. Our profitability is averaging around 13% or SEK1.1 billion per year. We have been continuing year over year to improve EBITDA value back in 2019. I consider 2019 as a temporary step back in our EBITDA value growth because we have had also temporary, let me say, facts on that. We face somehow decline of volumes combined with a huge effort to bring to the market new outstanding products that my colleagues have tossed and presented before. But I will say that the major disruption is what Alberto mentioned. We went through the process of separation from the electroless group that absorbed not only energy from not only cost, but energy from our organization. Energy that now that the process is over, we will dedicate to restart the profitable growth journey. As I said, we have 2 attractive segments. We have food and beverage that we have been growing 9% per annum and it is delivering a 13% EBIT margin or roughly SEK 600,000,000 per year. We have laundry that represent roughly 34% of our turnover where we are delivering a very attractive 17% EBIT margin or SEK 600,000,000 per year. When we move from the product perspective into the geographical perspective, I reconnect to what Philippe was presenting to us. Europe is our backbone. It represents 66% of our overall sales and we are continuing to grow Europe. We are continuing to grow our own market, both organically and via acquisition. And I see a bright future in front of us also for Europe and the execution of our strategy, the innovation strategy, the change strategy, the customer care strategy is paying off. We saw the example of a happy customer in U. K. There is also a happy Electrolux Professional Management UK because thanks to the focused investment in customer care in UK, we have been growing the business well above the average of the sales in UK and the average of the industry. So, there's a cushion of the strategy is paying off starting from Europe, our backbone. We have been growing consistently the largest worldwide market that is the Americas, in particular North America. We have had a 14% growth year on year, thanks to the combination of organic growth and the acquisition. Grandmaster was really a successful acquisition that brought not only the size of the existing company, but even accelerated the profitable growth journey. I have to mention also Asia. Asia has been growing year on year for several years. Somehow in 2019, we step back. And there is a good reason for this step back. I mentioned the larger transformation that Electrolux Professional went through during 2019 to get prepared to operate as a stand alone company. I would say that among the different geographies, Asia was the ones that was most affected. In Asia, we have to create our own legal entities, we needed to move our own offices, We needed to install Electrolux Professional IT System. So our organization, unfortunately, had to focus on these activities and somehow we could not dedicate as much energy to the Business Development. Now this is over and now we are back on track on the condition to restart the profitable growth journey also in Asia Pac. I've been developing so far a lot around the P and L of the company. I would like to spend now few words also on the balance sheet. During these many years, we continue to invest in our business And we are going to invest in our business also going forward. But what I would like to stress with you are 2 important things. 1st, we are operating this company with asset light measurement, with asset light weight. And here you have the measurement on operating working capital. Our average operating working capital on sales is ranging around 16%. We have been growing compared to the historical starting point of 2017 because we have added business, the acquired businesses with additional weight in terms of operating working capital on sales. And in particular last year, we have had an increase of the inventory due to the phase in and phase out of new products. But as Carlo mentioned, we have clear and action plan to improve an already asset light business to even a more competitive situation in term of asset management. The second point I would like to bring to your attention in this area is that the company continue to invest over the years for the future, continue to invest in improving the operations as much as on the product development. But this investment has been strictly monitored in a disciplined way. And our historical weight of CapEx on sales has been ranging around a couple of percentage points. Yes, we have had an increase compared to this value in 2018. We are going to have an increase also this year compared to this historical leverage and this is linked to the investment that Carlo just mentioned to us of the new plant in Thailand, where we are going to combine the laundry and the beverage operation, to be even more effective in serving the customer and driving the competitiveness of our operations. With that, let me say we can talk now about our ability to generate real money, the cash flow. The combination of steady EBITDA and disciplined management of the asset of the company is resulting in a strong cash flow generation. Also in 2019, where we have seen we have decreased in absolute term the EBITDA value, thanks to good management of our balance sheet, we have been able to generate over SEK1.1 billion in terms of flow. We have had a cash conversion on EBITA higher than 1. But this is not all. We are a company that is pretty solid also in terms of leverage ratio. We started we are starting our operation with the leverage ratio, relation between net debt and EBITDA below 1. 0.8 is our starting point. And this, together with a strong cash generation that we have been proved to be able to deliver and extensive credit line that we have already activated, I'm strongly convinced that we have the power, the liquidity power to support both the organic growth and the growth via M and A on our way forward. So we are really well equipped to manage the profitable growth of this group. Now, before talking about our ambition for the future, I would like really to spend a few words with you about what is happening in this month and the implication of this in the financial development of the company. When we approach 2020, we knew that we had some tough comparison on the top line because we have had large rollout in the 1st part of 2019. We knew that we had additional costs linked to the fact that we have to create a new corporate function. We need to run our separate IT system and infrastructure. And we got prepared for it. We got prepared launching a restructuring plan in September last year that we are executing and we are executing on time. We are constantly monitoring the execution of this plan. And this plan will create the condition ready from quarter 3 to compensate due to the separation. What we did not anticipate was the coronavirus. And here, as my colleagues explained before, we proactively, as management of this group, are managing the situation, taking care about the people. People come first with all the safety measure that Alberto explained. We are taking care about our customers with the measures that both Alberto and Carlo explained with us in order to secure business continuity and the best service level to our customer. But we are taking care also of our P and L and balance sheet about our shareholders because we have taken proactive measure to adapt our cost structure and our CapEx to the new reality that we are facing in these days. With that, I believe now we can pause about our track record. We have went through what is happening in these days. I believe it's time that we talk about our ambition for the future. Our vision is to continue to grow this company. To continue to grow this company, our ambition is to grow organically 4% per annum and accelerate this growth with a creative acquisition when opportunities come our way. We want to grow this company profitability. And we have our ambition is to be at 15% EBITA margin. It's absolutely achievable targets. We have been delivering on the 4% growth. We have been close to the 15% EBITA margin just a couple of years ago. And we want to continue to develop the organization, maintaining an asset light organization with a low leverage balance sheet. Also, in terms of capital structure, our ambition is to keep it with the ratio of net debt on EBITDA below 2.5. But the management of this organization is also ready if accretive and strategic important acquisition comes on our way, also to go temporarily beyond this threshold in order to drive this organization and this business to a different level. Thanks to a combination of strong P and L, strong disciplined management of the balance sheet, we will create also the condition to reward our shareholder with a payout ratio that is targeting to 30% of the net income per annum. Good. In the last part of my speech, I wanted to dig into one important piece, that is how we are going to deliver the margin expansion. And let me lead you through it. As I mentioned, we are now a standalone company and we are fully equipped to operate as a standalone organization. The business is up and running. This has meant cost that we have quantified in area of roughly SEK 100,000,000. And as I mentioned earlier, we took proactively the decision to launch a restructuring plan to fully compensate this cost and we are going to fully compensate this cost already from quarter 3, as I mentioned earlier. But this is not enough. We want to bring the margin of this company to a different level, but we want to bring it in a sustainable way. This is the reason why we identified 2 mainstream. 1 is the cost improvement area and the other is volume growth in particular in the high margin businesses that are the innovative product, the customer care and the chains. And to give you also the right view, I would like really to pick up a couple of examples. 1 on the cost improvement area and the other in the volume growth in the high margin business. I take one example that Carlo developed. That is the initiative that is bringing forward in our plan to improve product cost. And specifically, I want to talk about productivity improvement. Productivity improvement is part of the DNA of this company. We have detailed plans per plant that we are monitoring on a monthly basis. And when deviation comes, we proactively take measure to bring the targeted cost reduction in line with plan. The second example I wanted to bring to your attention is about customer care. You remember what we mentioned before. We have seen an epic customer. We have been growing sales in UK more than the average of the company more than the market. But also we have been growing the bottom line much faster than business sales, because customer care is a high margin business. And we have been proving that when we focus our investment, our efforts, we get fast the payback. With that, let me say it's time for my conclusion and my takeaway from you. And my take away from you is that, 1st, we are a solid company with a track record of delivery, steady EBITDA, cash flow and we start with a very solid balance sheet and adequate funding to support the organic and organic growth of this group. 2nd, we are operating in an attractive industry and the Lectures Professional has a unique position to win in this industry. 3rd, we have ambition, but achievable financial target. But mainly, this company, this group Thank you, Fabio, and thanks to all of you to stay connected with us during these hours. I hope I achieved the objective that I had at the beginning of the day when I said I will try we will try as a team to make sure that you have a clear understanding of which are our strength, which is our position in the market, a clear understanding about the market in itself and how is evolving and how this evolution is also creating opportunity for us to further growth. And the third element about the plan that we have. The plan that we have to capture this opportunity and to convert them in growth, in profitable growth. You have been also listening at customers or customer case have been presented because the customer voice at the end is the one that can prove if we are right or wrong. And having said so, thanks again for your attention. And I believe that with the Jacoba, we are opening for questions. Thank you, Alberto. As Alberto said, we will now open up for questions. There are 2 ways of asking questions. Either you can do it online, and some of you have already done so, or you can ask questions via the telephone. And I think we start with asking telephones asking questions via the telephone. So please go ahead, operator. Thank Our first question is from Erik Paulsen from Pareto Securities. Yes. Hello. I have two questions. The first one is on inventory levels now compared to your historic figures in the current coronavirus outbreak. You said that you want to come down in terms of inventory levels. But isn't it so that it could actually be good now to be high on inventories given the current supply chain situation and what we could see in the future. So could you just elaborate a bit on that here going forward? And the second question is just on the medium term in terms of the financial targets. How long is medium terms in your view? Okay. I think I can take these two questions. The first one, you're perfectly right and we are currently acting more than increasing the warehouse moving the warehouse or the stock that we have in the central hub here in Italy, in the local warehouses around the world to be closer to the customers, close to the needs of this customer because we believe that if project will probably slow down, for sure replacement and repair businesses will remain high. We are also in this moment producing full speed in our factories as Carlos said it. So we are up and running and be prepared to take every opportunity that could come in these days. The second question is what we mean with midterm. I think the midterm we are not defining the years. This is an industry where the cycles are in the range of 4, 5 years, but we didn't define the years as such. Okay. Thank you very much. Welcome. If there are no questions from the operator, I can take some of the ones that we have received online. A couple of questions related to sales split where they ask about sales split by end customers, hotels, restaurants, hospitals, etcetera, if we can provide that? That's the first question. The second one is also how much of our sales today that is related to aftermarket sales? And can you then split the aftermarket sales between consumables, spare parts, service, etcetera? That's are the 2 first questions online. Okay. So let's say the first one about the customer typologies or customer segments as we call them, so hotels, restaurants, so on. We don't provide the exact split either for this one and the customer care that is the second question. But what I can tell you is that we did the analysis about the customer typology and particularly these days considering the the spread of the coronavirus because we believe that customers such as hotels, restaurants, bars, pubs, QSR, quick service restaurants will be more impacted by the spread of the coronavirus and whatever is happening in economy. Then other segments like what we call institutional segment, hospitals, healthcare, elderly homes and other things. And looking at our current split of the sales, we believe that half of the market will be more impact half of our business will be more impacted than the other half. So it's basically fifty-fifty with different mix between laundry and food. If I look at the customer care question, as I said, we don't provide a split about that. But the thing that I can say is that looking at even other industry and the potential that we have, we see a lot of room for improvement to grow this business. In particular you were mentioning accessories and consumer, I have to say that in this area we just started. We just moved from being reactive, so selling the parts to the customers, asking us to repair the product, to be proactive in offering solutions that are making the product working better. Okay. Thank you. I have a couple of more questions online. Is there a difference between food service and laundry when it comes to customer care? That's the first question. The second question is more related to not the end customers, but can we say something about how much of our sales is direct sales or sales through distributors? Okay. So first question about the difference between customer care between food and laundry. I would say not significant, not material difference, but there are some differences related to the fact for instance that in our case in many more countries we provide direct service of foundry while we don't do it for food. And the other difference I would say between these two businesses is that the life of the laundry product is typically longer than the life of the food product and as a consequence requiring more intervention. The second question was about, sorry, can you remind me again? Yeah, the split between our own direct sales and sales via distributors or agents. Yes, yes. In this case, not providing the exact number, but I can tell you that the percentage of direct sales, so countries where we sell directly to customers is relatively small compared to the total. And the difference is mainly related to the geographical setup. Example, Philippe was presenting Europe. Clearly, in Europe, you have some country, Finland, Switzerland, where we sell directly to the end users. We have countries like Italy where we sell through partner that they are exclusively working for Lattlax. And then clearly in any other country France is 1 where we sell through dealers. So it's a very, very mixed situation that is related to the environment, to the market structure and to how we operate in these markets. Next question is related to R and D. We have approximately 4.4% of R and D through net sales. And the question is, is it that low given the fact we have such a broad portfolio compared to our competitors? That's the first question. The second question is related to the growth of dark kitchens. Is that for takeaway, whether that is negative or positive for us? Okay. In this case, I would take the first one and while I will ask Thorsten to further elaborate on the second. So for what concern the R and D, the percentage if I compare to peers in the industry is relatively high, is because we are investing a lot in innovation. But we have also to say that, yes, part is specifically related to the product, but we have an organization where many functions such for instance electronics is crossing all the categories. So we can leverage a lot of synergies among the categories in some of these functions. So electronics that now is becoming probably without probably the largest investment we are doing in product development together with the digitalization of the product is cross categories. So I would say that it is an important investment, but it's giving us the possibility to keep up to speed with innovative champions in the different categories. For what the dark kitchen is concerned, I think Thorsten Pong can clearly elaborate a little bit more with also some good example about that. Thanks, Alberto. Yes, the Ghost Kitchen, there's a lot of talk around and there's actually a lot of media then because it's quite new trend we see here. And I would say it really is a new customer typology and a new channel, and we are ready also to serve this channel because we handle big projects, and we are able to design really here the dark kitchens, and we are constantly in contact with these customers. We did quotations on this, and we also take some business on that. So for us, it's really a new sales channel, new customer topology, and we were able to serve them and to find for them the best solution because we have the right we are equipped for that and we have the right knowledge to do it. Thank you. I think we have a couple of questions from the phone. So please go ahead, operator. Thank you. So our next question is from Jan Enarson from Danske Bank. Please go ahead. Your line is open. Bjorn Enarson, Danske Bank. A few questions, please. Looking at the U. S. Operations, and I would assume that laundry is the big profit pool there. Is the food or the kitchen operation is that loss making in the U. S. Right now? And secondly, if you can talk a little bit about how big of your total turnover that is clearly project related? Thank you. Okay. So U. S, we don't provide the profitability by regions, so we don't provide this split. But I can surely tell you that laundry is an established business where we have a good market share. We are working with a great partner that has been working with us for more than 60 years, growing the business and getting a leadership position in the market. So surely it's a great business for us where we are leveraging our legacy and our position. The same applying in some way with beverage that in particular last year was significantly growing thanks also to the big rollouts. Food is growing, growing well and developing, but it's still relatively small compared to the other businesses. On that note on food in the U. S, you have had an ambition to grow that segment for quite many years. Is this basically the setup that you've been part of the consumer business or part of the Electrolux Group that have held back growth in that region, M and A driven growth? Or is it very competitive? Or why isn't the food market why hasn't the food exposure increased more rapidly in the past? [SPEAKER SEBASTIEN DE MONTESSUS:] I think I can answer with a personal experience there because I was there in 2004 when we started from greenfield, the U. S. Operation and I spent my 5 years in the U. S. Exactly to try to start up the business in the U. S. U. S. Is a challenging market where the main competitor are sitting there. So they are local, they are established and they work with customers for years. We have been growing because starting from 0 where we are is a good position and we have good wins with good customer, as I was also mentioning during the part of my presentation. But you I think you also noticed that we always said that we are looking for acquisition to further accelerate this growth because critical mass is important in the United States. And we believe that to get a better position in the United States, we need to have also these accelerators to help us in the growth. So that's the reason we did the Grandmaster that was adding the beverage side that is helping the development also of the food. And I think now food and beverage together is a pretty sizable business in the United States. If I move to the second part of your question that was related to the project business versus the unit sales business, Also again, we don't provide a split of how much of our business is project business and how much is unit sales business. But again, it's significantly different region by region in the meaning that in regions like the APAC, so Asia Pacific, Middle East and Africa, where the new operations are growing, I would say that majority of the business is project for us. In regions like North America where we have clearly a different position, we are more focused on single items, so it's more the units side. And Europe, I think, with the presence that we have is a balance between the 2. Okay, great. Thank you. Perfect. Welcome. Operator, please go ahead. Thank you. And our next question is from Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Thank you for taking my question. This is Johan Eliason, Kepler Cheuvreux. Talking about growing your presence in North America, you have some listed peers over there, midsized. Could you sort of elaborate on the pros and cons of making a deal, acquiring 1 or 2 of those companies? Thank you. Sorry, it was really disturbed at the end. Can you repeat the last part of the question? You get the first one, Alberto, you mentioned? Okay. I think we go to the to one of the web questions then. I have three questions from Andre Acre at Credit Suisse. So the first one is the laundry segment specifically. How has this business grown compared to the group overall? How do you expect this business to perform visavis the 4% organic target? So that was the laundry. The second question is margin expansion that our understanding is 2019 results was burdened with one off costs related to separation. Could you please quantify the cost for the separation and the one off costs? And thirdly, acquisitions. Do you have a pipeline of potential deal at the moment? And how active are you right now in the M and A arena? Okay. So also in this case, I would let Fabio answer the second question about the cost. Let me start from the first one. The first one is about the laundry business. In the laundry area we are expecting it has been growing clearly. I think Fabio presented that and it will grow. At least we believe it will grow even more in the future considering the investment that we have been doing in introducing new product. In particular, on the laundry side, we have been introducing many amazing new products that are creating value for the customers. We are in the middle of renovation process roughly 4 years and that will land next year. And in these 4 years we have been not only digitalizing all the product in laundry, 90% of the product will be connectable, but they are completely renewed. So big ops and big opportunities on the laundry side. Answering to the third one about M and A. M and A is not something that tomorrow morning I can decide to buy. I go there and I buy it. So yes we have a long list of companies where we are building relation. We are monitoring. We are trying to be ready when the moment comes to initiate a discussion that could convince the other partner to join the Alatoroz Professional Group. We have also to remember that majority of the company in this industry are privately owned, So relations are strategically important. So, Fabio, if you want to take the second one. Yes. For what concerns the EBIT margin in 2019, we have reported 11.4% EBIT margin. If I exclude the larger reported one off that are the restructuring provision that I mentioned in quarter 3 of last year and the positive one off related to a pension scheme transaction in quarter 2. The profitability of this group without item affecting corona volatility was 11.7%. Having said so, this 11.7% includes also costs related to the separation and the additional cost that we have as a standalone company, but we are not going to disclose this level of detail. Having said so, I can start to spend a few words about what I presented earlier. First, the restructuring plan is going to offset from quarter 3 the additional cost that this group is facing for the separation. Secondly, we have detailed and action on plan to improve the margin that I believe are pretty strong because they are a combination of cost improvement initiative, meaning taking out costs from this organization either related to product cost and made the example related to direct labor productivity, but also bringing into a margin expansion through dedicated and focused investment in the high margin business of our company. And I believe that what has been said during the last couple of hours, for example, on Customer Care is proving that this strategy is paying off not only in term of growth, but also in term of profitable growth. Okay. Thank you. I have 3 more questions from the web. The first one is the percentage of our employees in Italy. The second one is the innovation rate. Alberto, you spoke about 20% coming from new products the last 3 years. The question is, is there a difference between laundry and food with a higher innovation need? And the third question is, can we provide any information on the share of sales from hospitals? Okay. First, Italy. In Italy, we have roughly 1100 employee between Pordenone and Modena that is the other side where we produce beverage appliances. So this means that it's slightly less than something like 25%, 30% of our total employee are in Italy. 2nd question is about innovation, yes, innovation rate. So the fact that we have been renewing or better that sales from products that have been launched during the past 4 years are counting for roughly 20%. I would say that if I look back at this year, we have been introducing product both in laundry and food and beverage. So the growth is coming up probably a little bit more from laundry than the food, but we see that when we introduce new product, they are successful both on the laundry and on the food side. The third question was about the split about hospital. And again, we don't provide the exact rate, but what I said earlier regarding also our approach and our estimation about the impact that the coronavirus can have on our business is saying that what we call hotels, commercial restaurants, installations are accounting for roughly half of our business, a little bit more on the food, a little bit less on the laundry side food and beverage and laundry side. Thank you. We still have several questions related to aftermarket sales where the online participants are asking about more details. But as said, we will not provide that. One question, though. It's our workforce for customer service, whether they are our own workforce or if it's more of a third party. That's one question. Yes. It is a mix. It is the answer is similar to the one that I provided when we were talking about direct sales or indirect sales. In some countries, we provide direct services, service performed by our people employed by Electrolux. In some others we perform service with the service partner or partner that have been trained and certified and employed by a lot of Luxe, and they are working not only on our product but on others. So it is a mixed model. In some countries we have even what we call hybrid model, so where in the big metro area we have our own people, direct service, while in the wider and larger region we are relying on a service partner. So it is a mixed situation according to the geography and according also to the history. Okay. I have 2 more. I have few more questions on from the web. M and A strategy, what do we want to acquire and how do we realize synergies? That's the first question. 2nd one is related to chains in North America. If we can indicate our organic growth in North America over the past 5 years and how this has progressed? And how much of your EBITDA bridge that you presented medium term is in fact coming from progress in the chain area? Okay. So let's take the last two that are related to the North America development. We don't provide the exact information about these things, but chains have been growing and chains is clearly an organic growth. In particular in 2019, we have clear success with other chains that are, by the way, in some way making challenging the comparison of our 2019 results with the results with the performance in 2020, particularly during the 1st part of the year. The first question was about, sorry, can you remind me? M and A strategy. And M and A strategy, you're perfectly right. M and A strategy, we have been talking about M and A strategy. What I would like or we would like to get, we are looking at acquisition that are aligned with our strategic priority and the strategic priority are expansion in North America to get the critical mass, as I answered to one of your colleagues earlier, Getting stronger foot into the chain business. I would say for the beverage side we have been completing the range. We have a pretty quite competitive portfolio and the opportunities that are coming to be more locally present in the emerging market. Okay. Thank you. I have 2 more questions then. One is related to raw material cost. If steel prices are coming down, will you be able to keep these savings? And in the other direction, can you offset higher raw material costs with price increases when needed? And then I have a question on CapEx. What are the CapEx needs outside of Thailand? Will CapEx versus sales go back to historical levels after 2020? Okay. Thank you. And in this case, I would say that I will let Carlo answer the first question about the raw material, while I would ask Fabio answer the question about the CapEx. But raw material, as we discussed this morning, steel is the most significant portion for our raw material. So steel is public as a price. We have global negotiations with the key players, steelmakers, that are in order to guarantee not only control on the price trend, but also on the steel availability. So I think we are pretty strong in this perspective. We have a track record showing that we are able to have better prices than the spot market. Okay. When it comes to the CapEx level, this group has been managing the profitable growth with an historical level around 2%. As anticipated during my presentation, in 2019 and for 2020, we are above this level because of the large investment that we are doing in this moment in Thailand. But I expect that already from 2021 onwards we will go back to the historical level and this is what our strategic plan is confirming. Thank you. Two more questions from the web. One is about supplier and customer concentration. What can we say about that? The second one is about products from other manufacturers, whether we can include them in our digital platform. Those are the 2 questions. Okay. So for what concern the supplier concentration, I would let Carlo talk about this. For what concern the customer concentration, we have a large distributor in North America that is, as I said, working with us. He has been working with us for more than 60 years and he's representing a lot of Lux in that part of the world. Tom, if you want to Supplier concentration is one of the key driver for us to enhance our business. We said that we implemented our supply base quite significantly during the last years, thanks to the new acquisitions. Now we have the opportunity to reduce the supply base. And we come to do it having results not only on product cost, but also on the working capital, leveraging on new conditions in terms of delivery terms and payment terms. Thank you, Carlo. Good. Then we have this question about integrating products from other manufacturers into digital. Oh, sorry. Sorry. You're right. Yeah. And part of our business in particular on the food side, but not only on the laundry side is to deliver the full solution to the customer. When we do it, clearly we are adding to the product that we manufacture also the product that we purchase from other companies in the market. When we do this, these products are becoming a lateral product at the end. So they are part of our system and they can be integrated and will be integrated in the solution we provide to the customers. We now have a question from the telephone conference. Please go ahead, operator. Thank you. Our question is from Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Hello, again. It's Johan here, working from home, as you can understand. So I had some problems with my dog. But coming back to your M and A question, you have mentioned this net debt target basically implying you would be paying cash for some acquisitions? Are you also open to more transformative acquisitions potentially paying with your equity as well? Or how does your main owner look at this for the time being? Thank you. I can answer part of this question leaving also to Fabio to complete it. But we are looking at the scenario. For the time being, we are looking mainly at and there are the ones that also we perform that are bolt on acquisitions that are helping us to accelerate the growth and the achievement of the target that we have in line with the strategic pillars. I don't know, Fabio, if you want to spend some words about On a financial perspective, as you have seen during these couple of hours, we have, 1st, strong and steady cash flow generation year over year that are first giving us the additional money flows to support the organic growth and the acquisition, but we have also activated a credit line. We have a SEK 600,000,000 long term loan and SEK 250 million revolving credit facility. And these 2, we are going to use to support the organic growth and strategic fit in M and A opportunities that may come on our way. So we have the firepower to manage acquisition that are in line with our financial targets. Okay. I'll take the 2 last questions from the web. One is about the fact that we are currently implementing a new ERP system in our company that will take several years. What specific challenges does this present to the company? And does this project present any concern over the rigor of our financial control? That was the first question. Second question is related to profit and loss statement that we presented there where you could see that gross margin decreased from 37% in 2018 to 35% in 2019. And are these figures representative of the underlying development in 2019? And if so, what are the main reasons for the decline of the gross margin in 2019? So those were the 2 questions. Okay. Thank you. And in this case, I would ask Carlo to further elaborate about the ERP system implementation and Fabio later on to further comment about the gross profit development. Please, Carlo. It is true that our ERP landscape today is pretty fragmented, but we have BI tools in order to get all the information in a structured way, harmonized way in order to govern the group. We have a clear plan in order to harmonize the ERP system and we have it for the years to come with a task force dedicated to this, both for business and for the IT. Thank you, Carlos. For what concern the margin gross margin development in 2019, I would highlight 2 main factors. As anticipated during my presentation 2019, we have completed the introduction on the market of new important strategic product that Thorsten presented. And this meant somehow a peak of the effort for what consumed the R and D spending that is reflected into the gross margin. The second factor that I would like to bring your attention is that in 2019, we added a full effect of the company we acquired in the previous year and the new company that we acquired, Unique, in 2019. This company are running the business with lower gross margin, but this does not mean necessarily lower EBITA margin because they have a different cost structure than the rest of the group. Thank you, Fabio. And with that, we say that was the last question for today. So thank you. This event will also be available by recording on our website later to date. And with that, I would like to say thank you for today, and goodbye.

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